Toward a Perspective on R&D Outsourcing: RBV and Firm Performance

This paper looks at the vital role of industrial research and development (R&D). The increased outsourcing of industrial R&D is contrasted with a resource-based view of competitive advantage which maintains capabilities that are valuable, rare, imitable, and non-substitutable (VRIN), and should be internalized in the firm. Traditional business formation literature is also supportive of keeping R&D "inhouse". R&D outsourcing research is leveraged to posit possible reasons for the increased amount of outsourced R&D. Testable propositions are included that look at factors for R&D outsource decisions and also the impact of these decisions on firm performance. An R&D entropy statistic is introduced as well as several R&D characteristics useful in the decision-making process to create R&D.